Changes in Returns to Multidimensional Skills across Cohorts

While social skills have become increasingly important in the labour market, other skills may have lost relevance. Estimating these changes is challenging because skills measured before tertiary education affect wages both directly and indirectly through educational sorting. This paper develops a sequential model with cognitive, social, and diligence skills measured at age 17 to estimate direct and total early-career returns across recent German cohorts, while accounting for unobserved ability. Direct returns to social skills increased by 6 percentage points, whereas total returns to diligence declined. Among individuals with low cognitive skills, returns to diligence fell by 10 percentage points, consistent with high-diligence workers sorting into routine-intensive occupations whose value declined under deroutinisation.